India's largest software exporter TCS reported a marginal dip in March quarter net at Rs 8,049 crore on Thursday, but guided towards a very difficult time ahead which may even see a "contraction" in revenues in the first two quarters of FY21, as global clients fight the impact of the COVID-19 pandemic.
The company had posted a net profit of Rs 8,126 crore in the year-ago period.
The Tata Group company promised all its 4.5 lakh employees -- constituting over a tenth of the over USD 180-billion Indian IT sector -- that there will be no retrenchments but they will have to do without a salary hike for the year.
The company reported a 5.1 per cent increase in revenue to Rs 39,946 crore for the reporting quarter, while the same for the full year FY20 was up 7.1 per cent to Rs 1.57 lakh crore.
Ahead of the earnings announcement, all eyes were set on the commentary from TCS on revenue movement, client confidence and their willingness to spend amid the coronavirus crisis.
The company's Chief Executive Officer and Managing Director Rajesh Gopinathan said the impact of the COVID-19 pandemic will be just like the global financial crisis, but exuded confidence that revenues will be back to the levels of March 2020 quarter by December 2020 or March 2021 quarter, after two quarters of impact.
From a long-term perspective, the business model is intact, Gopinathan said, adding that the aspirational operating profit of 26-28 per cent will still be chased by the company once this period is over.
It is very difficult to model the impact that the crisis will have as it is still early days into it, but it is suffice to say that the percentage impact on revenues will be similar to the one the company had in the aftermath of the global financial crisis (GFC) in 2008, it said.
Chief Financial Officer V Ramakrishnan said in the short-term, there will definitely be an impact, pointing out that there may also be a "contraction" and added that the reverses may be like the GFC or even more.
Gopinathan said the difference between the current crisis and the GFC is that unlike the past experience which affected only a few sectors, this episode will see all the verticals being impacted.
"We are in the midst of a storm. It will get worse before it gets better, but we have a good ship and a good crew. We have what it takes," Gopinathan told reporters after the company's board meeting.
He also said the reality of working from home has required a sea change in the model with which it works, wherein earlier associates used to be working out of large campuses across the country.
In the last fortnight of March, the company was forced to make a switch to a completely new model, where the same associates started working from home, he said, adding that it took 7-10 days to stabilise.
The company's Chief Operating Officer N Ganapathy Subramniam said 90 per cent of the 3.55 lakh associates working in India have been equipped to work from home and are meeting all the client requirements.
He also said the initial trends suggest an improvement in productivity as well and there are a lot of learnings on staffing strategies for the company from the ongoing crisis.
Gopinathan said the company closed the quarter with a total contract value of USD 8.9 billion and added five clients who will have an annual billing of over USD 100 million during the quarter.
From a geographical perspective, US and Europe showed some weaknesses, while sectorally, life sciences and communication and media verticals performed well, he said.
He acknowledged that the company has a greater reliance on the battered travel and hospitality sector as a proportion of its revenues, but seemed to bet on the long-term strategic relationships with clients which may help it once the crisis tides over.
From a human resources perspective, it added 24,179 employees in the year gone by to take its total to 4.49 lakh employees. The attrition rate stood at 12.1 per cent.
Gopinathan said it will not retrench any employee in the face of the reverses on the revenue front and will also honour all its past commitments on hiring freshers, while Head of HR Milind Lakkad said the staff will have to do without a hike for the year.
Lakkad also said that the company will be taking a call on promotions on a quarter by quarter basis, based on the overall performance.
The board of the company, which is the biggest source of cash for parent Tata Sons, recommended a dividend of Rs 6 per share at the meeting on Thursday.
The company scrip closed 1.09 per cent down at Rs 1,715.60 apiece on the BSE on Thursday ahead of the result declaration, as against gains of 0.73 per cent on the benchmark.
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